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Why 68% of Facebook investors voted to oust Zuckerberg as chairman

The pressure for Facebook (FB) CEO Mark Zuckerberg to lessen his influence at the company is intensifying after 68% of shareholders voted to split his chairman and chief-executive roles last week. The proposal would also establish an independent board leader.

Trillium Asset Management, which owns nearly $7 million in Facebook shares, filed the proposal, arguing that having one person as both CEO and chairman allowed for the social media giant’s slew of recent mishaps.

“What we are seeing right now is really a quite deep well of concern of the concentration of power in one individual like we see with Mark Zuckerberg,” Trillium Asset’s SVP Jonas Krone tells Yahoo Finance’s YFi PM. “This is a shareholder proposal that in 2017 got 50% of the vote. Obviously, a lot has happened over the last two years and seeing that vote jump to 68% is a big message for the board and for Mark Zuckerberg personally.”

The push comes as Facebook faces mounting scrutiny into its handling of users’ personal information and antitrust concerns. The Federal Trade Commission and House lawmakers are reportedly planning a sweeping review of Facebook — along with Google (GOOGL) and other big tech companies — to determine if they are stifling competition at the price of consumer safety.

Facebook's reputation on the decline
Facebook's reputation on the decline

Still, Zuckerberg’s voting power will most likely be able to stunt the proposal despite concerns. The CEO’s stake grants him 10 times the votes of the average shareholder, holding 57.7% of the voting power this year. Even so, Krone says the proposal gives shareholders a much-needed voice.

“We are providing a vehicle for Wall Street investors to share their opinion and I think [Zuckerberg] respects that opinion,” Krone notes. “I think he can look around and see that Alphabet and Apple and Autodesk and Microsoft all have independent board chairs. Alphabet has a dual-class structure and an independent board chair as well as a founder/CEO. So I think we have a lot of models for Mark Zuckerberg and Facebook to look to.”

And companies splitting power at the top is a growing trend. Half of S&P 500 companies had a separate chair and CEO in 2018, up from 39% a decade ago, according to leadership consulting firm Spencer Stuart.

Krone says the separation is important for investors who may not just be able to walk away from Facebook if they do not agree with its structure.

“There are a lot of different kinds of investors in Facebook right now,” Krone says. “Some of them are investors that could be selling out, but there are a lot of investors that are not in the position to do that. Facebook is in the indexes so they are going to have to own Facebook. For those investors, this is the only way they have to act and communicate on behalf of their clients, shareholders and beneficiaries.”

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